SBI hikes short-term FD interest rate: Check details here

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Following closely on the heels of private sector lender, HDFC Bank, the (SBI) has announced a hike in fixed deposit (FD) interest rates.

According the SBI website, the bank has hiked the interest rate of FDs below Rs 2 crore with a tenure of 1 year to less than 2 years by 10 basis points. These FDs will now earn 5.1% (increased from 5%), with effect from January 15, 2022. Senior citizens will earn 5.6% (up from 5.5%).


Source: SBI website

Has rate reversal trend started?

In December 2021, SBI increased its base rate by 0.10 percent or 10 bps, according to its website. The new base rate, that is, 7.55% per annum, will be effective from December 15, 2021. This looks like it is a signal for a start to the end of the low interest rate regime. That is because besides being a reference rate for borrowers, the base rate also works as an indicator of the direction of the overall interest rate in the economy.

A rise in base rate indicates that the falling interest rate trend is finally reversing and going forward we may see a few more hikes in interest rates. Rising interest rate is good news for fixed deposit investors who have been earning one of lowest returns in the last two decades.

Banks are slowly beginning to increase FD rates now.

HDFC Bank has increased interest rates on fixed deposits (FDs) for select tenors. These rates will be effective from January 12, 2021. According to the bank’s website, it has raised interest rates on FDs worth less than Rs 2 crore with maturities of above two by five-10 basis points. According to the website, now FDs with tenure between 2 years 1 day and 3 years will earn 5.2%, 3 year 1 day and 5 years will fetch 5.4% and 5 years 1 day and 10 years will fetch 5.6%.
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